Ford May or May Not Cut 25,000 Jobs, Depending On Who You Ask

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Ford might be or might not be planning big layoffs, Care by Volvo is pissing off Volvo dealers, and Hyundai reportedly wants to make a special factory where workers get paid less. All that and more in The Morning Shift for December 5, 2018.


1st Gear: I Know This Is Hell For Everyone At Ford And For That Blame Your Bosses

When General Motors roiled both auto industry workers and politicians with its announcement to close down a bunch of factories and shed thousands upon thousands of jobs, everyone was just sort of like “wow, that’s terrible for GM.”

But is Ford about to top GM for company most likely to ruin Christmas this year? That depends on who you ask, and who you trust.

Adam Jones, an analyst who covers the automotive industry for Morgan Stanley, says that he thinks that Ford is planning on cutting a huge amount of workers (via CNN):

Ford (F) said this summer that it was planning to radically reshape its business, and could close or scale back unprofitable operations in some regions. It said it would spend up to $11 billion on the transformation.

The company has revealed little detail about its plans. Adam Jonas, the auto analyst at Morgan Stanley, said he believes Ford is preparing to slash 25,000 jobs worldwide. He expects that most of the cuts will be in Europe, where Ford has long struggled, but he said North American plants and workers won’t be spared.

And while 25,000 is A LOT, Ford CEO Jim Hackett gave Bloomberg a frankly terrifying non-denial denial:

CEO Jim Hackett told reporters Tuesday that Ford didn’t provide numbers to Morgan Stanley analyst Adam Jonas, who estimated the significant employee reduction in a report a day earlier. Ford said in July it would spend three to five years on an $11 billion restructuring.

Ford will make an interim announcement about plans for its workforce later this week, Hackett told reporters in Michigan.


Car companies pull this kind of thing all the time, and it’s frankly one of the most annoying things about covering them. You’ll ask them for comment on something that has extremely strong evidence backing it up, and they’ll go “we haven’t announced that yet.” Which, like, no, you haven’t, but that wasn’t the question that was asked.

In this case, someone said Ford was going to cut 25,000 jobs, and Ford’s response boils down to “we haven’t written the press release for that yet.” Ford is blowing it.


2nd Gear: Some Volvo Dealers Are Really Mad At Volvo For Its Subscription Service

Care by Volvo is, in theory, a pretty neat idea. Pay $600 a month, and you get a car and everything that entails – insurance, maintenance, repairs, you name it. Easy peasy. You can even just keep getting a new car every single year for that same $600 price, if you want it.


But Care by Volvo is a mess. We’ve heard from dozens of would-be Care customers mad about delayed cars, or cars that were promised but never delivered before they just said “screw it” and got something else as a traditional purchase or lease.


And now, to add to the messiness, Volvo’s California dealers are pissed that the program even exists, because it cuts into their traditional business model, according to Automotive News:

The California New Car Dealers Association is asking Volvo to immediately stop its Care by Volvo subscription service in the state after a review found what the association contends are violations of California franchise and consumer protection laws.

In a Nov. 30 letter to Anders Gustafsson, CEO of Volvo Cars of North America, Brian Maas, president of the California association, said Volvo through its Care by Volvo service is “directly competing” with Volvo dealers and that Volvo illegally modified its franchise agreements with dealers. Maas also wrote to Gustafsson that the variability of pricing of vehicles through Care by Volvo may “constitute illegal ‘payment packing.’ “


Which is a typical response from American dealers, who generally know how to do only two things: sell cars and fix cars. You can’t even buy a new car on the internet in 2018. Did anyone expect them to be cool with a subscription service?

Volvo, for its part, defended the service to Automotive News, saying essentially that they spoke to all the dealers, and Actually, Everything is Fine. But that’s not what the dealers say:

The California New Car Dealers Association has met with Gustafsson and exchanged several letters with Volvo about the program and dealer concerns, Maas said. He told Automotive News that Volvo has failed to satisfactorily answer the association’s legal questions.


To be honest, the brutal but most logical solution here is to probably just get rid of the whole dealership model as it exists today, as it was designed for an entirely different world a century ago, and is protected from real competition by lobbying for rent-seeking laws intended to protect it.

But you go ahead and try to find an honest lawmaker willing to say that.

3rd Gear: It’s Generally A Bad Idea To Let People Decide How Much They Pay Themselves, As Nissan Is Discovering

Letting corporate executives determine their own compensation package with no oversight is probably one of the dumbest ideas ever to emerge from capitalism, and yet, here we are in our hell world. For some reason it looks as if it has taken Nissan literally years to discover this concept, and it may be part of the reason why now-former Nissan chairman Carlos Ghosn is out, Bloomberg reports:

What is certain is that Nissan’s own corporate governance rules gave unusual powers to its former chairman, a business celebrity who was given extraordinary deference for having once rescued the automaker from financial ruin. Those powers included near-total say over how much — and how — he was paid, according to Nissan’s own internal rules.

Several people familiar with the prosecutors’ investigation now say the probe appears to hinge on a relatively arcane point of accounting — whether retirement payments were properly booked. Whether or not Ghosn broke Japan’s securities law by feeding the wrong numbers to Nissan’s board and its accountants (at this point, the allegations are unproven), corporate governance expert Jamie Allen says the deeper question is how anyone could have gotten away with something like that.

“It all comes back to a lack of internal controls,” said Allen, head of the Hong Kong-based Asian Corporate Governance Association.


If your boss came to you and said “you get paid whatever the hell you want to be paid,” you’d probably end up really overpaying yourself, too!

I’m still going with the theory that Ghosn was whacked for trying to fully merge Renault and Nissan.


4th Gear: Well Ain’t This Some Messed Up Shit?

Hyundai Korea is basically looking to hire an entire factory’s worth of scabs, according to the Financial Times:

South Korea’s Hyundai Motor plans to build a factory that will employ workers at drastically lower wages than their peers doing the same jobs elsewhere in the country, raising concerns that the carmaker is looking to work round unions in a bid to slash costs.

Hyundai is building the plant as a joint venture with the southern city of Gwangju, as well as suppliers and other investors, according to city officials, to make sport utility vehicles.

Workers at the new Gwangju plant will be paid about Won35m ($31,492) a year, less than half the average Won92m wage for existing Hyundai workers, in a deal set to be announced on Thursday.


An analyst in the FT article makes the great point that this isn’t just some “cost-cutting” from Hyundai, it genuinely seems designed to break the union itself:

“The company seems to want to use the new plant as a leverage to weaken its union’s demand for higher wages,” said Angela Hong, an analyst at Nomura.

“The industry is suffering from overcapacity with GM closing down some plants, but Hyundai is going against the trend,” said Ms Hong. “It doesn’t make sense to build another plant at a time like this.”


I’m not saying this sort of thing should factor into whether or not you buy a Hyundai, but don’t you dare forget it.

5th Gear: Solidarity Forever

Hyundai’s workers are trying to fight back against the greed of the company’s executives, Reuters says:

Hyundai Motor’s South Korean union will stage a four-hour strike on Thursday to protest against the automaker’s move to set up a low-cost carmaking joint venture, a union source told Reuters.


Stay strong, Hyundai workers.

Reverse: Britain Didn’t Have Any Highways Until 1958

Seriously. Isn’t that wild?

Neutral: Are There Any Truly Ethical Car Companies?

Good luck trying to argue that it’s Tesla.



2nd gear:

To be honest, the brutal but most logical solution here is to probably just get rid of the whole dealership model as it exists today, as it was designed for an entirely different world a century ago, and is protected from real competition by lobbying for rent-seeking laws intended to protect it.”


Customers need a place to service their cars, and letting a manufacturer affiliated shop do the work simplifies warranty coverage.

I imagine most people want to test drive cars before they buy them... Way cheaper to have them come to a central location than some decentralized mobile service.

Plus if something goes wrong with the car, who the hell wants to deal with customer service? A car is expensive and complicated enough that any issues should be dealt with in person.

Dealerships are far from perfect but I don't think it makes sense to sell $35,000 cars like $7 USB dongles. There are enough functions related to car ownership that warrant the existence of dealerships.